ANALYSIS OF THE SITUATION IN THE REAL ESTATE MARKET
Turnover in the real estate market (excluding newly-built real estate) in 2004 amounted to approximately € 949,473, i.e. 3,44% of the Croatian GDP.
Over the past several years, there has been a period of stabilization and slight growth in the Croatian real estate market. The banking system has started to function properly and a new generation of real estate purchasers has emerged. Quality property on the coast is in demand.
The emergence of quality real estate through the denationalization or return of properties to their original owners has had a great impact on the real estate market. Returned real estate properties are very interesting to the market because this translates into new attractive business premises in the very hearts of cities.
Some real estate properties (land, old real estate, real estate in commerce between citizens and legal persons which are not subject to Value-Added Tax) are subject to Real Estate Transfer Tax, while the aacquisition of newly-built real estate properties (those built, delivered or paid for after December 31, 1997) are subject to Value-Added tax at a rate of 22%.
Real estate transfer tax is paid by those who acquire real estate (including:purchase, exchange, inheritance, gift, acquisition and withdrawal of real estate proeprty from a company, property acquisition from liquidation or bankruptcy procedures and on the bases of a court decision). Real estate transfer tax is paid at a rate of 5% on a tax base calculated as the market value of the real estate at the moment of acquisition.
The law provides for numerous exemptions from real estate transfer tax (general tax exemption for real estate property brought into a company.
AQUISITION OF REAL ESTATE RIGHTS IN THE REPUBLIC OF CROATIA BY FOREIGN CITIZENS AND ENTERPRISES
Provided the condition of reciprocity is met, as regulated by agreements between the Republic of Croatia and the country of the respective foreigner's residence or business domicile, foreign legal entities and natural persons may acquire real estate in the Republic of Croatia, if this is approved by the Ministry of Foreign Affairs, based on a prior opinion of the Ministry of Justice of the Republic of Croatia.
The applicant may initiate the approval procedure either personally or through an authorized attorney, by submitting a written request to the following address:
Ministry of Foreign Affairs, Consular Department, Meduliceva 34, 10000 Zagreb ( www.mvp.hr ).
The request must contain the following enclosures:
-
legal basis for property acquisition (purchase agreement, gift agreement, support agreement, etc.), in the original or a duly certified copy;
-
seller's proof of title i.e. land certificate, in the original or a duly certified copy, not older than six months;
-
original certificate (not older than six months) issued by the authority of local administration responsible for urban and physical planning (country offices) evidencing that the property lies within a construction zone, as envisaged by the zoning plan;
-
proof of citizenship for the buyer (certified copy of passport), or proof of legal status (certificate from the register of companies);
-
proof of citizenship for the seller (ID copy or passport will do);
-
if an attorney is involved, it is necessary to submit a power of attorney, in the original or a duly certified copy; and
-
non-certified copies of all the documents enclosed with the request.
In the administrative procedure conducted before the Ministry of Foreign Affairs to decide on the request it shall be determined whether there is reciprocity between the Republic of Croatia and the country of the applicant's nationality. This particular requirement is met if Croatian citizens have the right to acquire property in the applicant's country. Aliens may not acquireownership of real estate property in excluded areas, on agricultural land, in protected natural areas, forests, or on forest land.
If approval is granted, the alien may apply for the registration of ownership in the land register and must pay the real estate transfer tax. The signature on the contract of sale may be notarized only upon receiving approval from the Ministry of Foreign Affairs. The notary public shall deliver a copy of the sales contract to the Tax Administration in the area in which the real estate is located.
An alien whose request has been denied approval to acquire property many not reapply for a period of 5 years from the date of submission of the request denied.
*This information has is courtesy of the Croatian Chamber of Economy. Visit their website where you will find different reports and statistics about the different business sectors: http://www2.hgk.hr/en/
*Link to real estate activities report prepared by the Croatian Chamber oif Economy: http://www2.hgk.hr/en/depts/trade/nekretnine.pdf |